Tag Archives: Value Based Care

SPI Digital Health: The Hanging Questions of Babylon

Last week, Babylon Health announced that it had secured a $34.5M interim loan to support ongoing operations as it embarks on a wide-ranging restructuring and re-capitalisation programme. At the same time, the company said it would come back into private ownership next month.  

The news comes as the UK-based provider juggles widening net losses, mounting debts and rock-bottom shares, despite burgeoning revenues from its US value-based care (VBC) activities. 

The bridging loan and delisting plan are the latest in a stream of efforts by Babylon Health to slash losses and restructure debts with the goal of becoming profitable. Last year the company, which offers virtual, in-person and post-care services in 15 countries, said it aimed to cut annual costs by $100M. 

Babylon Health says the interim loan, which is part of a framework agreement with VC firm AlbaCore Capital, will buy it time to implement the restructuring and re-capitalisation programme. The company says the loan will strengthen its balance sheet and provide additional liquidity to support the privatisation plan. Under this plan, Babylon Health’s core operating subsidiaries will be sold to a new entity capitalised by AlbaCore and other investors.  

The Signify View 

With losses widening, Babylon Health has little option but to take these latest steps in its battle for survival. The company has, over the last two years, tried several different approaches to stem the tide of losses and, in its words, ‘provide sufficient capital for Babylon’s funding requirements through profitability.’  

It sold consumer health engagement firm Higi at the end of the last quarter, having acquired it just months previously. The company has also signalled its intention to sell Meritage Medical Network, which has around 700 specialist and primary care physicians and which generates $400M in annual revenues. Babylon also received an $80M private placement 12 months ago (as part of its 2021 IPO) to support the business. It has also made substantial job cuts. 

But Babylon’s main problem remains: the soaring costs it faces to provide care services to customers (it provided 5.1M consultations in 2021). Between Q1 2022 and Q1 2023 losses widened to $63.2M from $29.1M. For every dollar Babylon earns, it loses money, a situation also faced by telehealth giant Amwell (which we detail in this Insight).  

Babylon’s total Q1 2023 revenues were a healthy $311.1M ($266.4M in Q1 2022), but the faster its revenues grow, the faster its losses are mounting. Achieving scale is coming at a big cost. 

State-Side Shift 

This double-edged sword has its roots in a 2021 decision by Babylon Health to shift its strategic focus. 

Formed in 2013 in London, the firm cut its teeth with the NHS in the UK. But its presence in that market was unpopular with the predominantly small primary care GPs practices in the country. They were wary of what they saw as a large, VC-backed provider coming in and poaching their young and healthy (ie cheaper to care for) customers, and leaving them with more complex, older and costlier patients. 

Realising their UK business was never going to properly scale in that environment, Babylon Health pivoted to the US value-based care (VBC) market in 2021. The decision was quickly vindicated, and this market now accounts more than 90% of the firm’s total quarterly revenues. For example, of its total $289M Q4 2022 revenues, it earned $268M from providing services directly to patients, or by outsourcing services to third-party providers, under Medicaid, Medicare and commercial insurance VBC contracts.  

While the rapid uptick in revenues in impressive in and of itself, growth is easy if you’re willing to make a loss to achieve it. Babylon Health’s success in the US VBC market is therefore both a blessing and a curse, especially when it was assumed that by scaling, profits would materialise. 

The SPAC Curse 

This is not the only strategic curse to have struck Babylon. At around the same time as it was pivoting to VBC in the US, the company decided to list on the US market to cash in on surging demand for its virtual care offerings at the height of COVID. It wasn’t the only vendor to jump on the IPO bandwagon at the time – SOC Telemed (via a so-called Special Purpose Acquisition Company (SPAC) listing) and Amwell (via a traditional IPO) did likewise – believing the hype generated by massively elevated interest in telehealth. History now shows that telehealth companies were overvalued and short-sighted. They listed, the pandemic receded, and virtual care demand growth decelerated. Share prices collapsed, and never recovered. 

In Babylon’s case, its listing via a SPAC merger was, in its CEO’s words, a ‘disaster’. A SPAC listing effectively means the target company (e g Babylon) merges with a ‘blank cheque’ company (the SPAC) set up solely to raise capital through an IPO. SPAC listings were trendy in 2020 and 2021. VC firms and investment houses, in particular, found them an attractive vehicle to raise money from the public and then deliver much-needed liquidity to their merger target companies. 

And so, during the SPAC boom Babylon Health’s merger with SPAC Alkuri Capital was approved. The deal promised $575M from the listing for Babylon, but things quickly went downhill. Uniquely with this type of listing, even if a merger has been approved by a SPAC’s shareholders, they are able to cash in their shareholdings at any time, including pre-merger.  

Unfortunately for Babylon, 90% of Alkuri Capital’s shareholders opted to do just that shortly before the deal went through. Babylon was left with just $275M, a significant shortfall on the original, and its shares fell off a cliff. This then set in motion the chain of events we described earlier in this Insight as Babylon scrambled to recover from the blow. 

The SPAC boom was short-lived, and Babylon Health was one of several ‘victims’ of it. The 10% of Alkuri’s investors who chose to keep their money in the business could also be excused for feeling like victims in this too. As Babylon goes private again next month, much of their money will vanish with the deal.   

The Long, Lonely Road to Profitability 

While its SPAC experience has been serious for Babylon, the company has since fought hard to restructure its debts, raise funds and cut costs to keep heads above water. It has succeeded in the sense that it is still a going concern, and it has an admirable VBC model in the US. 

But the path to profitability remains a painful one, and Babylon Health will need deeper costs cuts. But how?  

The company’s losses indicate that it is unable to deliver care within the budget of the VBC contracts under which it operates. To do so, it needs to be more proactive and predictive in managing population health; for example, better managing those with chronic conditions, reducing hospital admissions/readmissions, knowing who to screen and ensuring all patients undergo an annual wellness visit.  

It also requires investment in better resource care management teams to manage more expensive patients, in better IT to fully understand its populations and facilitate risk stratification, and in population analytics so Babylon knows where to prioritise resource. A long-term investment approach, where losses can be absorbed until financial savings are realised, is needed.  

The company has already shed assets that would have helped it offer that more proactive care. Higi was a VBC-geared provider offering BMI and other health screening services in US retail outlets.  

Double-Edged Sword 

There is no doubt that Babylon Health can be a serious disruptor in the US VBC vendor market. But its biggest enemy right now is its own success in quickly growing its customer base, which has led to growing losses.  

The bridging loan and the re-privatisation plan buys time, and in a business bleeding money and accumulating debt, time is arguably its most precious commodity right now. 

SPI Digital Health: As Patient Activation Remains a VBC Provider Pain Point, is Cisco’s CPaaS the Remedy?

The value-based care (VBC) IT ecosystem continues to evolve and mature. But patient activation and engagement remain the ‘missing links’ on the ‘last mile’ of the VBC chain. Hundreds of vendors are seeking to close this gap, but most solutions fail to find the sweet spot of giving care managers the tactical intelligence to guide their care strategies, while enabling populations to take greater responsibility for their health. 

At last week’s HIMSS2023 show in Chicago, Cisco demonstrated its enterprise communications platform (CPaaS). Having enjoyed some success in the NHS in the UK with it, Cisco now has high hopes for CPaaS in the US, by far the world’s most developed VBC market. 

The Signify View 

A complete PHM/VBC IT solution enables healthcare providers to aggregate all the data from different sources (e g EHRs, claims, social determinants of health) and develop risk stratification, clinical decision support and analytics tools so providers know exactly who their most expensive, highest priority cohorts are (as illustrated below).  

In recent years, IT vendors have developed and delivered an almost complete ecosystem of data aggregation, health insights and care co-ordination tools that are highly valued and used by ACOs, IDNs and other organisations where success under VBC reimbursement is paramount. However, among care management IT buyers patient activation and engagement remains a key challenge in executing on the workflows that these insight tools inform. The tools provided to support this are mostly falling short.  

Complete Integrated Care/PHM Solution

This area remains something of a ‘blind spot’ for providers and vendors. Leaning on the old adage ‘if you build it, they will come’, some providers have discovered (the hard way) that it is not enough to just build a portal or booking management tool and assume patients have the time, inclination or even the basic IT skills to register and log in to access their personal health information, book appointments and view content or care plans. Some providers acknowledge the struggle with their portals’ ‘digital front door’, where it might take several clicks for a visitor to find the information they need. 

Some healthcare providers also still rely on their EHRs to activate and engage patients. But data pulled into EHRs is not broad, particularly around social determinants of health and payer data that would offer an additional layer of information on how to handle different patients. The fact that some providers use multiple EHRs exacerbates the challenge. 

Indeed, all EHR and PHM vendors have a tool that claims to support patient activation and engagement, and EHR vendor marketplaces are awash with software bolt-ons. But most of these solutions fail to address some of the process and IT hurdles providers face in delivering VBC, and the hurdles patients face when interacting with these solutions. Multi-channel bulk communication (e g via SMS or WhatsApp) that triggers calls to action to a patient (for example sending a link to make an appointment) is available on many EHR platforms, and is one step up from asking a patient to log in to a portal or relying entirely on old fashioned calling for patient outreach, but it is still very manual. Providers recognise that good communication and education to change patient behaviour are key enablers in VBC.   

Solutions, therefore, that offer a more strategic and tactical approach to patient activation and engagement are valuable. More than ever, patients need more accurate patient activation and engagement tools with built-in intelligence that can identify care gaps. They also need solutions that improve the patient experience, are secure, are interoperable with different platforms used for patient identification, use software that can find unstructured data more easily and have AI/ML capabilities to identify rising risk patients through predictive analytics. 

Competitive, but no Game Changer 

By all accounts, CPaaS is a highly competitive solution that performs at the same levels of other leading products in this space. Cisco is very well-resourced with a pedigree in US healthcare via Webex and IMImobile (the UK company bought by Cisco in 2021), and the fact that CPaaS is geared towards VBC is another positive. But what would enable CPaaS to really stand out would be more focus on game changing ‘tactical’ intelligence around patient activation and engagement for care management teams. 

Cisco also faces stiff competition from other, more established vendors in the US VBC market. PHM vendors like Innovaccer, Inovalon and 1upHealth (who we wrote about last week in this Insight) – previously focused on data aggregation and workflow tools helping prioritise patients, develop analytics and offer best practice recommendations on how to manage patients with different conditions – are now focusing on patient activation and engagement, with some success. 

Some have achieved success by acquiring specialist technology, especially in the last couple of years. Recognising the opportunities in patient activation, Healthcare Catalyst, a major non-EHR vendor, bought Twistle in mid-2021.  

Leveraging more patient behavioural data to bring more intelligence into CPaaS, thereby allowing providers to gain a greater understanding on the best channels and best times for patient outreach and activation, would certainly help the product stand out in this competitive market. Further data on patient support networks and how these can be leveraged to support adherence to care plans, appointment booking and medication adherence, are also tools that buyers would value to enable a more tactical approach to patient activation. 

Big tech companies also enjoy obvious advantages in this market. The likes of Google and Amazon have a wealth of patient behavioural data without needing to rely on an EHR or clinical data. If anyone can manipulate human behaviour to follow care plans etc, it is big tech. Provided patient privacy concerns can be overcome, they could be a very disruptive element in this market. 

Different Routes to Market 

Given the above, and the fact that Cisco is launching CPaaS into a cauldron of a US market, it must choose its route to market carefully. Aside from selling direct to hospitals, what other options exist for Cisco? 

It is noteworthy that the company has a decent position in the US virtual care software market. It competes with telehealth specialists Amwell and Teladoc, video conferencing generalists like (Microsoft) Teams and Zoom and some EHR vendors that have their own virtual care platforms. Selling CPaaS as a provider-patient bridge to an established virtual care customer base could be a viable option. 

Another option would be to partner with a leading VBC IT vendor. As mentioned earlier, many of these vendors have focused on developing data aggregation and care management workflow/analytics tools, to the detriment of good patient activation tools. This is now a focus for many, and Cisco could have a part to play here by partnering with these vendors. Many will have the behavioural data needed to inform more tactical outreach, and the combination of this with CPaaS would offer the potential to really address the needs of provider care management teams.   

Lack of Definition 

Patient activation and engagement is the final piece of the VBC ecosystem jigsaw and is a current focus of technology investment. As IDNs and ACOs seek to arm themselves with the full suite of VBC solutions and close any final remaining care gaps, the patient activation and engagement tools market is ever more fiercely competitive.  

Launching CPaaS into the US now is good timing on Cisco’s part, but it is just one of any number of solutions and product differentiation will be its biggest challenge. How Cisco develops the product to address the points raised above will ultimately determine just how disruptive it can be.  

Signify Premium Insight: Addressing VBC Pain Points: UpStream’s $140M Vision

Last month, primary care services and technology provider UpStream Healthcare announced it had raised $140M in its latest funding round. The company says the money will enable it to scale nationwide. This will mean helping more primary care practices in the US move into value-based care (VBC), and increasing income from reimbursement contracts for senior Medicare and Medicare Advantage patients. 

However, if it is to successfully scale the business, UpStream will need to address several customer pain points.   

The Signify View 

We have written regularly in recent Insights about how VBC is steadily transforming primary healthcare models in the US. With neither the technology nor resources of large health networks, independent practices find it harder to transition to VBC. In response, an ecosystem of technology and service providers, including UpStream, has emerged to support this transition.   

Solid Foundations 

UpStream was established in 2018, and occupies a solid position in US primary care management. Its technology platform (powered by Innovaccer) helps around 2,900 physicians co-ordinate care for approximately 175,000 senior patients on Medicare plans. The company claims it has helped its customers (mainly small, independent practices) reduce in-patient and post-acute spend by 20%. This aligns well with VBC principles. 

Tech Pain Point 

With a $140M war chest, UpStream can now work towards its scaling up goals. Success will hinge on it addressing several customer pain points that currently stand in the way of them achieving true VBC. 

The first challenge for any primary care practice when operating under a VBC-based contract is understanding its population. It needs a longitudinal view of all its patients’ healthcare interactions. Not just those provided by the practice in question, but interactions with hospitals, specialists, community service providers, out of network providers etc. However, for most the IT required to do this is not in place. While large health systems have the resource, budgets and technical knowledge to put in place IT that aggregates data from these multiple sources, independent practices and smaller networks face a huge challenge.

A recurring complaint from primary care practice decision makers is the lack of interoperability between the platforms they need to aggregate data across to obtain this longitudinal view, and the heavy lifting required to do this integration and data aggregation. Each practice has its own EHR, but this only provides a narrow view of each patient’s full health history. When the providers’ need is to pull information to obtain a longitudinal view, manual processes must typically be followed. Buyer demand is for solutions that provide an automated route to obtain this combined view using IT. This includes not just clinical data from EHRs, but also payer data, data on the patient’s healthcare journey, or information from regional HIEs. Such visibility and understanding of the population lies at the heart of VBC. Without it, a practice cannot prioritise patients or develop a clear workflow strategy to care for them.

Independent practices also lack the resources, expertise or time to buy, implement and manage technology to alleviate these pain points. However, there is an appetite among some to invest in technology and care management solutions if they can envisage a return on their investment in the form of increased revenue from reimbursements under VBC contracts. PCPs prefer upside financial risk where they will not be penalised for not reducing healthcare costs/meeting targets. UpStream offers monthly Guaranteed Advanced Payments for Quality (GAP-Q), completely opposite to the traditional VBC contract where physicians wait for reconciliation with a payer. 

Instead of practices having to procure and implement the PHM technology needed themselves, UpStream does this for them and provides a service to support the data integration process. Further, it can then also provide the expertise, care management services and IT that allows for risk stratification and care co-ordination processes to be followed. This is essential for providers looking to maximise revenues under VBC contracts such as Medicare Advantage.

Age Old Problem 

Another challenge facing some independent practices relates specifically to senior care, which is UpStream’s focus area. Decision makers describe the difficulty practices face engaging with this population segment, whether in scheduling appointments or encouraging them to visit a primary care physician. Many seniors, for example, prefer to consult a specialist rather than primary care physician. Furthermore, social determinants of health (e g food security, housing, transport and mental health) play a bigger role in this segment. These factors all make it harder for practices to operate under VBC contracts when supporting this patient cohort, purely from a “patient activation” perspective. 

Formidable Partnership 

UpStream is well placed to address the technology pain points described above. The company’s platform is powered by Innovaccer, which has a good track record of data integration and a renowned PHM solution. Innovaccer already has integrations with hundreds of EHRs, meaning it can quickly integrate new customer EHRs into its platform. Unlike IDNs, which tend to prefer to buy their PHM solutions from their EHR vendor. The platform also has the potential to use artificial intelligence (AI) to run risk segmentation, though this depends on robust and comprehensive data which offers a full, longitudinal view.

Addressing patient engagement problems will be more challenging. UpStream will need to invest a sizeable chunk of the $140M to build teams to engage with patients to set up appointments, make sure they attend annual wellness visits, and follow care plans. This labour-intensive approach introduces potential problems with staff burnout and staff retention. 

While these are unwelcome (and costly) by-products of providing senior care, this is a potentially rich seam of business if UpStream can adequately resource its customers. This is where the real rewards of Medicare and Medicare Advantage reimbursement lie, and cracking this code will put the company in a very strong competitive position.

Competitive Ecosystem 

UpStream is one of a growing number of so-called practice management company/managed service organisations which have emerged to meet growing demand for care management technology and services. There are some big hitters here: Signify Health (whose model has similarities to UpStream’s) was bought by retail pharmacy chain CVS last year for $8B. VillageMD bought urgent care provider Summit Health for $9B, also last year. CareCentrix, Agilon, Privia and Tebra also vie with UpStream in this market. All have a common goal: to help healthcare systems, payers and independent practices make more money from VBC.  

Big tech and the large retail pharmacy chains are also starting to bulldoze their way into primary care. Amazon lost out to CVS in its bid to buy Signify Health last year, but the logistics giant has unfinished business in this market. Other retail pharmacy chains like Walgreens are also making inroads. It is estimated that this year retail primary care clinics will account for double the share of the US primary care market than they did in 2022.

UpStream and its rivals will watch these developments with interest, but with few real concerns in the short- and medium-term. 

Cottages to Consolidation 

In the long run, the ‘cottage industry’ nature of the market will give way to greater consolidation. Independent practices will be squeezed out, and some will be bought by the larger companies.

That may well be the fate that eventually befalls UpStream, whose target customer base of independent practices is slowly shrinking as they are swallowed up by IDNs. For now, however, the potential for new customers in primary care technology/services outweighs the losses of a declining total available market. 

With $140M ready to deploy, and an excellent ally in Innovaccer, UpStream is set to scale. If it can help its customers better engage with patients and deliver true VBC, the company has excellent medium-term prospects. In truth, current funding may be insufficient for UpStream to scale nationally, but expanding to 20 states over the next 12 months will still be a success. And from there, future investor interest should be forthcoming.